Major bank penalties to fund financial literacy

The federal government has announced that it will establish a new financial literacy body tasked with distributing community benefit payments from banks to organisations that boost financial literacy and capability.

The government is set to form a new independent body, overseen by the Financial Literacy Board and chaired by executive director of ipac securities Paul Clitheroe AM. They will be joined by Air Commodore Robert Brown, women’s leadership advocate Elaine Henry and executive director of Financial Counselling Australia Fiona Guthrie, who were all appointed in January.

While the body does not yet have a name, it will be a not-for-profit public company that will be responsible for managing and distributing the $40 million in community benefit payments made by ANZ and NAB, and the $10 million committed by the government in the federal budget to developing women’s financial capability.

Following the Australian Securities and Investments Commission’s (ASIC) investigation of Bank Bill Swap Rate manipulation, ANZ and NAB agreed to pay $20 million in community benefit payments.

“[We’re] expecting the [Federal Court] to hopefully agree the settlement that has been agreed in principle with CBA for $15 million, although that is a matter for the Court, but once that is settled that money can flow through to the fund,” the minister said.

The minister also noted that where ASIC accepts enforceable undertakings in the future, it may agree to further community benefit payments to be paid to the new body.

Ms O’Dwyer stated that such payments will be used by the new body to administer grants to organisations that seek to improve the financial literacy and capability of consumers, while also supporting other government initiatives including the National Financial Literacy Strategy, the government’s Women’s Workforce Participation Strategy and the More Choices for a Longer Life package.

“Financial literacy and capability is critical for economic empowerment, including for Australian women and young and older Australians,” Ms O’Dwyer said in a statement.

“This new body will be a game-changer, a lasting institution that will support consumers and build financial capability for all Australians no matter what their circumstances.

“It will become Australia’s peak body in championing financial literacy and capability among Australians. It will use funds received as a result of corporate wrongdoing to educate and empower Australian consumers of financial products and advice.”

Minister O’Dwyer made particular reference to the importance of strengthening the financial literacy and capability of women, as first mentioned in the budget.

“One of the issues we know in particular for many women is their confidence around their finances,” the minister said.

“[Women] have not been as in touch with their finances [and] have to learn quite late in the piece what assets they have and how to manage those assets.

“[We] want to send the message to all Australians that no matter where you are on your financial journey, whether you’re at the beginning, in the middle, or towards the end, it is never too late to increase your capacity to be able to take charge of your situation and to have the best tools available to you in order to do that, and so that’s where we are coming from on this.”

Ms O’Dwyer told the media: “We want to actually build something that’s going to have a lasting legacy for Australians that will live beyond governments and will become to financial literacy and financial capability what beyondblue has been for mental health.”

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